CVS Health's new guaranteed net pricing PBM returns 100% of rebates to clients

Days after closing its $69 billion merger with Aetna, CVS Health is unveiling a new pharmacy benefit manager pricing model that guarantees the average spend per prescription, after rebates and discounts.

It works across all distribution channels from retail, mail order and specialty pharmacy.

The predictability of the guaranteed net cost model makes it different than current models, the company said.

By focusing on net cost per claim, CVS Caremark will pass through 100 percent of rebates to plan sponsors. This would first include employers before expanding to other clients.

The company would be accountable for the impact of drug price inflation and shifts in drug mix.

Clients will continue to have the option to implement point-of-sale rebates to provide plan members visibility into the net costs of their medication.

THE IMPACT

Plan sponsors that can see the net cost of their pharmacy benefit are expected to select their PBM provider based on that criteria.

Current pricing models offer discounts and rebates, but do not provide net cost predictability. Also, the variability between PBMs can make it difficult to draw direct comparisons, CVS Health said. The new model more closely aligns PBM incentives with plan sponsors' objectives.

Clients that better manage drug utilization or encourage the use of lower-cost therapeutic alternatives see the benefit in their overall plan drug costs.

Any clients transitioning to CVS Caremark as their PBM can adopt the guaranteed net cost model starting in 2019.

THE TREND

The new model was in development before the closure of the deal with Aetna at the end of November, CVS Health said, adding it has been briefing benefit consultants as well as current and prospective clients.

Despite steady price increases by manufacturers, CVS Caremark has kept drug cost inflation under control, CVS said.

In 2017, drug price growth for CVS Caremark PBM clients was 0.2 percent, when manufacturers had price increases of nearly 10 percent. In addition, improvements in medication adherence helped reduce overall healthcare costs for CVS Caremark PBM clients by $600 million in 2017, the company said.

HOW IT WORKS

The guaranteed net cost is calculated using plan utilization and expected rebate value, and applying projected drug price inflation and expected shift in drug mix, such as from brands to generics.

ON THE RECORD

"We see a real opportunity to offer clients a simpler economic model that leverages proven PBM cost management strategies to provide predictable drug costs," said Derica Rice, president, CVS Caremark. "As a result, CVS Health is introducing a straightforward, more holistic approach that enables plan sponsors to clearly see the net cost of their pharmacy benefit and select their PBM provider based on that criteria."

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com